A Q&A with the
Justice Department on the Ticketmaster/Live Nation merger

January 29, 2010

BY JIM DeROGATIS POP
MUSIC CRITIC

The following is a
transcript of an interview conducted
Thursday afternoon with
representatives of the Department of
Justice in response to a request for
answers to numerous questions
regarding its approval on Monday of
the merger of Ticketmaster and Live
Nation. This interview was conducted
under the agreement that the
responses would be attributed to the
Justice Department, rather than
naming the participants in the
interview.

Q. I'd like to start by asking about
the exclusivity agreements that
Ticketmaster signs with almost every
venue in America. The Department of
Justice first investigated
Ticketmaster during the Clinton
administration, after which the
government took no action. Pearl Jam
famously was credited as
spearheading that fight, though the
Department of Justice actually went
to the band instead of the band
going to the Department of Justice.
Because the band chose not to work
with Ticketmaster, it couldn't play
anywhere in the U.S. for almost two
years, and it was one of the biggest
bands in the world at the time. More
than one independent promoter has
said to me over the last few
days--and throughout the yearlong
consideration of this merger--that
while those exclusivity agreements
are still in place, there really can
be no competition. During the press
conference announcing this
settlement, Assistant Attorney
General Christine Varney noted that
20 percent of those exclusivity
agreements will expire this year.
But that means that 80 percent of
them will stay in place.

A. The point is
that 20 percent of them come up
every year, so that while a lot of
venues have these exclusive
provisions with Ticketmaster--or
with other ticketing companies, for
that matter--that they typically
don't run longer than five to seven
years on average. Roughly 20 percent
of them are coming up every year for
renewal, so that provides an
opportunity for the venues when
their contracts come up to actually
go out and renew them.

I also think it's important to
recognize that the exclusive
agreements are not just for the
benefit of Ticketmaster, or insisted
upon by Ticketmaster--that actually,
in the course of our investigation
in talking to a lot of venues,
venues don't want to have more than
one ticketing company, either. For
some of them, a contract of a
reasonable length in term of five
years or something like that is
actually a benefit to the venue
itself in order to be able to have
predictability in terms of those
costs and expenses and know that,
"O.K., we've settled now who are
ticketer is and we [won't have to
deal with that again until] our
contract expires. So I wouldn't
consider them to be just
unilaterally imposed by
Ticketmaster; that certainly wasn't
what we found in the course of our
investigation.

Q. I know that venues
prefer these deals. But in Chicago,
every major concert venue in the
area has a deal with Ticketmaster,
and if a band or a promoter or the
combination of the two wants to play
in this market to 2,000 or 20,000
people, and they chose for whatever
reasons not to work with
Ticketmaster, they just can't do it.
It just seems like there can't be
competition if these contracts
remain in place.

A. I definitely
understand that point, but I don't
think it's something related to the
merger itself, which is what we were
investigating. Those agreements, to
the extent they exist in your
market, all predate Live Nation and
are unrelated to the merger with
Live Nation and I don't think are
directly affected by that.

Q. It seems to me that it
is part of the merger, in terms of
the vertical integration. Live
Nation, now that it is
Ticketmaster and vice versa, is not
going to not renew with Ticketmaster
when the ticketing contracts on the
140 venues that it owns expire. You
can say, "Well, that's not every
venue in America." But in fact, Live
Nation owns the vast majority of the
outdoor amphitheatres in America, so
that entire tier of the business is
going to be locked into Live Nation
and Ticketmaster.

A. Well, they
would have been locked into Live
Nation before, right? Irrespective
of the merger, those Live Nation
venues were going to be controlled
by Live Nation.

Q. Sure. But let's say
the Department of Justice had said,
"One thing we think has to be done
for this merger to take place is for
Live Nation to divest of its venues.
It's promoting bands, it's managing
bands, it's selling
tickets--competition can't exist if
it also own the venues." If Live
Nation had to divest all the
amphitheatres, the new owners of the
amphitheaters would have been free
to choose between these three
ticketing companies that are being
created: Live Nation, AEG or
Comcast-Spectacor.

A. The problem
is that there isn't a good basis in
antitrust laws for challenging
vertical integration just sort of
for the sake of challenging vertical
integration. It's one thing where
you have the ticketing company that
dominates--Ticketmaster, which has a
level of dominance over the
ticketing business--but if you start
looking at promotion and venue
ownership and concerts, and those
are things that are not directly
affected by horizontal competition
as a result of the merger, when you
start talking about those vertical
theories, aligning the different
chains, you get torn between whether
that can provide some real benefits
to consumers versus whatever less
competitive outcomes might happen.

Q. Let me cite the
example of an antitrust ruling
against vertical integration that is
being quoted by a lot of consumer
advocates and independent promoters:
the Supreme Court ruling in 1948 in
"United States vs. Paramount
Pictures, et al." At that point, the
Supreme Court said, "Hey, Hollywood
movie studios, you make the movies;
you distribute the movies; you
cannot also own the theaters that
show the movies." With Live Nation
now, we'll have them creating or at
least managing the content,
distributing or promoting the
content across the country, selling
the tickets--not to mention the
T-shirts and concessions and the
rest--and owning the venues.

A. It's
definitely true that that's the
result of the merger. Paramount is a
bit of a different era in antitrust
law, I think you'd have to say. I
don't think it would be as simple a
case to bring in 2010.

Q. The Department of
Justice does not think there would
be the basis of a Supreme Court
challenge here?

A. I don't know.
Obviously, what we thought was the
case that we saw competitive harm in
was the case that involved the
ticketing industry. In other areas,
we certainly heard from many people
presenting complaints along the
lines that you are setting forth,
and we felt that we didn't have the
evidence to challenge on those
fronts.

Q. I'm curious about the
firewall provision in section nine
of the settlement ruling: It's one
paragraph. Let's say Jam Productions
in Chicago wants to bring a
fantastic band to town; it's
competing with Live Nation and AEG
to host that concert, and
miraculously, it wins. It has to use
Ticketmaster to sell the tickets,
because as I said, Ticketmaster is
locked into every major venue in
Chicago until those exclusivity
agreements expire. Jam's biggest
competitor, Live Nation--a company
that, court testimony shows, once
expressed its desire to "crush, kill
and destroy" Jam--is now going to
know how Jam put that deal together
and how it does business, and it's
going to make money off of Jam's
work via those egregious service
fees that it tacks on to every
ticket. How does the firewall
actually help Jam?

A. The firewall
is designed to protect the
confidential information that sort
of arises out of the ticketing. If
Jam goes and promotes a concert at a
venue that is ticketed by
Ticketmaster, it stops that
confidential information from being
shared with the rest of the combined
merged company. So they can't take
the data that comes out of the
ticketing relationship with Jam or
the ticketing event that's being
promoted by Jam and take that
information and use it in their
promotion business or use it in
their artist management business to
compete against Jam, or for any
other reason, for that matter.
That's the purpose and the intent of
the firewall, to protect the people
who need to go in and have a show
put on at a venue that is ticketed
by Ticketmaster, but who are
competing with the Live Nation
promotion business, or whose artists
are competing with the [Live
Nation-owned] Front Line Management
side of the company.

Q. There are no specific
provisions in the government ruling
about how the firewall will be
enforced, though it does say that
people won't be able to have access
to information from a competing
promoter unless they need it as part
of their job.

A. Right. The
people in the ticketing business of
course need access to the ticketing
information, because their job is
related to ticketing. It just
prohibits those people from taking
that information and moving it over
into the other side of the business,
into the concert promotion or artist
management business.

Q. But who will enforce
that?

A. Obviously,
the Justice Department, the
antitrust division which is headed
by Christine Varney, will enforce
it. There are substantial provisions
in the final judgment that give us
the right to go in and request
information and documents, to
request regular reports, to conduct
investigations if we find that there
is any evidence of a violation or if
we want to assure ourselves that
there is no evidence of any
violation. We have those rights to
affectively and aggressively enforce
the decree and we will certainly
take advantage of those provisions.

Q. But it's not as if
there is going to be a Department of
Justice hall monitor sitting on a
stool in between the door from the
ticketing office at Live Nation and
the door to the promotion office at
Live Nation.

A. Of course
there's not going to be someone in
their actual building, but there
will be someone with the right to
look at their emails and interview
them and investigate any possible
wrongdoing that they might commit.

That's an important point, and
don't take that lightly. We do
actively monitor consent decrees. We
really do have a staff that does
this, and will really monitor what's
going on in the industry. We have a
long history and experience in
dealing with these kinds of things.
It is an important point and I
wouldn't take it lightly.

Q. My experience as a
reporter covering these two
companies for the last 15 or 20
years has been that transparency is
not their strong suit. They don't
answer questions, they don't respond
to the press, it is very difficult
for a consumer to find a complaint
number to express dissatisfaction
with Ticketmaster or Live Nation...

A. But there's a
difference between reporters and the
Department of Justice, who can use
law enforcement, the courts, they
can be held in civil contempt, they
can be fined, so it's a little
different.

We put a lot of time and effort
into enforcing decrees, and it's
very possible to get to the bottom
of these things when you're trying
to find out the facts regarding a
particular incident. It might be
that there's no public number for
the public to call up, but there's
definitely a number that we can call
if we need information, and we can
get documents, information, take
depositions, and conduct any kind of
investigation we might need to in
order to enforce the decree, and we
will.

Q. Let me ask more
generally: There is a
well-documented history than many
congressmen and senators and
consumer advocates referenced during
the congressional hearings on the
merger last year of neither of these
companies being particularly
consumer-friendly. Yet Ms. Varney
several times during the press
conference said this merger
settlement will be good for
consumers, there will be competition
and prices will come down. I am
having a hard time squaring the
history with those statements.

A. What we saw
when we looked at the merger was an
opportunity to really protect
competition by the divestitures that
we ordered and by the conduct
provisions that we have, and
obviously when you do that kind of
protection of competition, that is
going to force the companies to
engage in more pro-consumer behavior
and behave more responsibly. That's
what we were focused on enabling and
that's what we think the decree
successfully does.

Q. AEG and Comcast-Spectacor
obviously have said they support
this merger, since the settlement
gives each of them a piece of
Ticketmaster's business. But what
about the fact that every other
remaining independent promoter of
size in the United States opposes
this? There seems to have been no
consideration given to the
independent promoters.

A. I wouldn't
say that there was no consideration.
We talked to a lot of different
people, and obviously, we don't
disclose exactly who we talked to,
but I can certainly assure you that
we talked to a lot of these
companies and tried to take into
consideration the best we could the
facts as they appeared to us and as
we learned them in our
investigation. That's why we put
together a decree that has three
prongs to it, that sets up AEG in
the ticketing business, which is
someone smaller promoters can use if
they want to; and Comcast-Spectacor,
which gets all the assets from the
Paciolan business, and when you put
those together with the behavioral
provisions, you put all those things
together, they don't just protect
AEG and Comcast. They protect all
the promoters and all the venue
owners, from the largest ones down
to the smallest ones.

Q. But you guys must be
reading the press: From coast to
coast, every single independent
promoter that I've seen quoted in
any publication, or the many that
I've interviewed myself, all are
against this settlement and really
hate it. I have not seen a single
quote from a smaller promoter
saying, "I'll be really happy now to
have three choices for ticketing,
and I guess this merger isn't going
to be as bad as I initially feared."
Not a single one!

A. I'm not sure
how to answer, or if that's really a
question. All I can tell you is what
we found in our investigation.

Q. I'm asking that if
every independent promoter in
America seems to disagree with the
ruling, is that cause for concern
for the Department of Justice to
consider if maybe it missed
something?

A. All I would
say is that we've heard all of the
concerns expressed all the way
throughout our investigation. I
don't think we're learning new
things by the things that are coming
out and people are saying in public.
We took it all into account in the
decision that ultimately we made.

Q. O.K. Now, I'm in
Chicago, and you can't be a reporter
in Chicago and not always have one
eye on politics. Ticketmaster's
board of directors included
President Obama's longtime friend
Julius Genachowski, until he
resigned to accept the appointment
to chair the FCC. Live Nation's
board of directors includes
Hollywood superagent Ari Emanuel,
the brother of the President's chief
of staff, Rahm Emanuel. Did either
of them file letters in support of
the merger?

A. There was
no... We don't make our decisions
that way. We make our decisions
based on the facts and the law and
the facts that are before us.

Q. I understand that. I'm
just wondering if either of them, as
part of the mountains of information
on the merger that was considered
pro and con, if either of these
members of the companies' boards
weighed in?

A. Again, I
think if you want to ask questions
of who might have weighed in, we
don't talk about who. We get
comments from the outside from
people as we look at transactions.
We don't talk about that. But
obviously, anybody who's weighed in,
whether it's you or your neighbor,
if they want to talk about it, it's
up to them. But this decision was
made at the Department of Justice by
the career staff and the folks in
the antitrust decision, and it was
based on the facts. There was no
influence from anyone--no influence
at all, it was all based on the
facts.

Q. On the micro-level,
Ticketmaster owns TicketWeb, which
does ticketing on the level of clubs
down to 100 or 150 people. TicketWeb
does its best to mask its connection
to Ticketmaster, and in fact its Web
design goes out of its way to look
as if it's done by a punk rocker in
his basement. I've talked to several
small club owners since the decision
on the merger who've said that they
don't want to do business with
TicketWeb anymore, now that it's
part of Live Nation, and they want
to get out of their contracts. This
goes back to the issue of, "I
thought I was doing business with
one company, and now I'm in bed with
another."

A. That can
happen in any merger. It's not an
antitrust issue in the sense of
competition being lost in the merger
as a result of a change in the
ownership. In any merger, a company
may get bought by someone that
somebody else doesn't like and
doesn't want to do business with
anymore. What we're trying to do is
preserve when those people's
contracts are up that they have good
choices to go to and good
opportunities to take advantage of.
I know we've seen at the club level
that there are tons and tons and
tons of competitors out there that
provide ticketing services for those
types of venues. Obviously, we have
no real basis to go in and break all
the Ticketmaster contracts that they
have with venues.

Q. You could have asked
them to divest.

A. I don't think
that that was really an area where
we saw a level of concentration or
competitive concern that you see at
the bigger venues. If people are
telling you they'd like to leave for
someone else, we never heard from
people at that level who felt that
they didn't have anyone else to go
to.

Q. What about the
management component? That wasn't
ever a consideration for divesting?

A. You can look
at market shares and things like
that in management, but the area
where we found the competitive
concern was in ticketing, and that's
what we focused on in our remedy and
that's where we required the
divestitures and other behavioral
provisions. Obviously, we looked at
the management in the context of the
effect it might have in the
ticketing market, and along with the
promotional it's the reason you have
those firewall and data portability
and behavioral restrictions, but in
and of itself, it's a market that...
well, there are a lot of managers
out there. Even thought Front Line
is large, and it may be even larger
than all of its competitors, it
doesn't actually have a very large
share of the overall market when you
look at it.